Omnicom & Publicis agree merger

Omnicom Group Inc. and Publicis Groupe SA have merged to create the largest advertising company worldwide – Publicis Omnicom Group – worth $35.1 billion (€26.5 billion), the two companies have announced.

They added that the new company, with over 130,000 employees globally, will be even better positioned to serve clients’ evolving needs.

The Publicis-Omnicom merger was approved unanimously by the Boards of Directors of the two companies.

The new company – the Publicis Omnicom Group – will have an impressive list of iconic agency brands, including:

BBDO

BBH

CDM

DDB

DigitasLBi

Fleishman-Hillard

Goodby

Interbrand

Ketchum

Leo Burnett

MSL GROUP

OMD

Proximity

Publicis Healthcare Communications Group (PHCG)

Publicis Worldwide

RAPP

Razorfish

Rosetta

Saatchi & Saatchi

Silverstein & Partners

StarcomMediaVest

TBWA

Zenith Optimedia

CEO of Omnicom, John Wren, said:

“Both Maurice and I believe this new company reflects our vision of retaining the best talent, attracting an incredible roster of clients and leading innovation. Omnicom and Publicis Groupe are reshaping the industry by setting a new standard for supporting clients with integrated messaging across marketing disciplines and geographies. This combination will enable us to leverage the skills of our exceptionally talented people,our broad product offering, enhanced global footprint, and tremendous roster of global and local clients. In short, we believe this is a merger that will set our new company on a path to accelerated growth, with long-term benefits for clients, employees and shareholders.”

Chairman and CEO of Publicis Groupe, Maurice Lévy, said:

“The communication and marketing landscape has undergone dramatic changes in recent years including the exponential development of new media giants, the explosion of Big Data, blurring of the roles of all players and profound changes in consumer behavior. This evolution has created both great challenges and tremendous opportunities for clients. John and I have conceived this merger to benefit our clients by bringing together the most comprehensive offering of analog and digital services. Equally important, it will offer our talented people new avenues for growth and success at the crossroads of strategic intelligence, creativity, science and technology.”

Publicis Omnicom Group will be jointly led for 30 months

For a period of 30 months – the initial integration and development phase – both Mr. Wren & Mr. Lévy will be co-CEOs of the merged company. Then, Mr. Lévy will become non-executive Chairman and Mr. Wren will carry on as CEO. The Publicis Omnicom Group will have a single-tier board with 16 members, including both co-CEOs and 14 non-executive directors, seven from each company.

After the merger transaction is completed, Bruce Crawford, who is the current Omnicom Chairman, will be the non-executive Chairman of Publicis Omnicom Group for a period of twelve months. During the second year, Elisabeth Badinter, current Chairperson of the Publicis Groupe, will take over as non-executive Chairperson of the merged company. Badinter is daughter of the founder of Publicis and a major shareholder.

Merger expected to create significant value for shareholders

The two companies say the merger is expected to create considerable value for shareholders. Combined they will have a broader portfolio of agencies and services, as well as wider and deeper geographic penetration worldwide. In an online press release, Publicis wrote “The future scalability and internal synergies of the combined company are expected to generate efficiencies of $500 million (€377 million”.”

Omnicom and Publicis have been expanding in emerging markets, particularly in Brazil and China.

Publicis added “The transaction is a cross-border merger of equals under a holding company, Publicis Omnicom Group, in The Netherlands. The Group’s operational head offices will continue to be based in Paris and New York.”

As the advertising, marketing and media industries undergo a complete transformation, due to digital technology, the last few years have seen a number of mergers and acquisitions. In 2012, Dentsu Inc. of Japan agreed to acquire the British media-buying company Aegis for about $5 billion. Digital companies and agencies in emerging markets are being “snapped up”, according to WSJ (Wall Street Journal). Companies from Silicon Valley, including Adobe Systems and Salesforce.com are entering the industry.

Omnicom has been concentrating on working with technology firms and building internal web capacity. Publicis, on the other hand, has been aggressively acquiring digital advertising agencies, such as Razorfish, LBI and Digitas. Omnicom and Publicis say that the new merged firm will be in a much better position to compete in digital media.

Conflict of interest

Some industry analysts wonder what the new company will do regarding rival clients. Pepsico Inc. is one of Omnicom’s largest clients, while The Coca-Cola Company is a Publicis client.

Will there be an antitrust hurdle?

Industry analysts also wonder whether the new merged mega-giant will attract regulatory scrutiny in the USA and Europe.

Omnicom is currently the second biggest advertising firm in the world, and Publicis the third. Together they will have major clients, including PepsiCo, Coca-Cola, Nissan Motor, Royal Philips, McDonald’s, Procter & Gamble, BMW, and many others.

According to Advertising Age, the two companies spent $3.34 billion in media placements for clients in 2012, or about 41% of total spending by the ten largest media agencies globally.

According to Bloomberg, John Wren and Maurice Lévy both said in a press conference that they do not expect major regulatory hurdles.

The BBC says that Publicis Omnicom Group will overtake UK rival WPP in size.